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European alternatives industry approaches €1.50t in AUM
Research - JUNE 14, 2018

European alternatives industry approaches €1.50t in AUM

by Released

Total assets under management for the alternative assets industry in Europe reached a record €1.48 trillion ($1.72 trillion) as of September 2017, according to a new report from Amundi and Preqin.

Growth has been driven by strong inflows of capital: Europe-focused private capital funds — including private equity, private debt, real estate and real assets — secured a record €184 billion ($214 billion) in 2017, having seen annual totals increase every year since 2011. At the same time, 52 percent of Europe-based hedge fund managers saw net inflows in 2017 –— the highest proportion of any region — as the industry recorded €27 billion ($32 billion) in net capital inflows.

Fundraising activity has been supported by strong long-term performance compared to other investments. Europe-focused hedge funds posted average annualized returns of 6.33 percent in the five years to the end of March 2018, significantly above the 1.94 percent posted by the FTSE 100 in the same period. Private capital funds focused on the region, meanwhile, have returned an average of 14.7 percent in the five years to September 2017, higher than either North America-focused (13.1 percent) or Asia-focused (12.5 percent) funds.

Europe has a rich and evolving alternative assets ecosystem, with more than 5,700 fund management firms and 2,800 institutional investors overseeing investments across private equity, private debt, real estate, infrastructure, natural resources (collectively termed “private capital”) and hedge funds.
“With a mix of mature and emerging economies, and an evolving social, political and regulatory environment, the European market for the alternative assets industry requires careful navigation,” said Mark O’Hara, chief executive – Preqin. “Certainly, European alternatives are in rude health, and the prospects for growth are good: more than 2,800 investors in the region allocate to one or more alternative asset classes, and assets based in the region are nearing €1.5 trillion [$1.7 trillion].

“But the coming years won’t be without challenges, particularly in the face of more stringent regulation, as well as the end of quantitative easing and its impact on the availability of financing. Now more than ever, investing in Europe requires expertise and judgment to materialize its promised rewards.”

Pedro Antonio Arias, global head of real and alternative assets – Amundi, added, “It is no longer just European banks and governments that are providing funding for the real economy: insurance companies and pension schemes are also playing their part. The popularity of alternative investments among pension schemes and insurance companies is well understood: the unconventional monetary policies developed in response to the global financial crisis had a significant impact on all asset classes.

“Real assets are appealing to long-term investors for three reasons: they allow such investors to capture an illiquidity premium; they enhance income through a source of predictable returns; and they create diversification, as they have low correlation to traditional asset classes.”

 

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